O'Reilly Auto Parts puts growth in high gear: Relationship with local track big part of plan for retail, distribution expansion

May 7, 2007

Few Hoosiers had heard of O'Reilly Auto Parts before the Missouri-based company built a massive distribution center in Hendricks County and bought the naming rights to Indianapolis Raceway Park last June.

Now, the company, which was founded in 1957 and went public in 1993, figures to become a major retail presence here.

Already, 14 stores have cropped up here among 35 that opened statewide. That makes 1,700 stores in 25 states for the company that reported revenue of $2.3 billion in 2006, up about 20 percent from 2005.

O'Reilly officials are promising much more here, including operating scores of stores, expanding the company's distribution center, and employing 2,000 Hoosiers.

"This is a company that is growing aggressively wherever it locates," said Jonathan Braatz, a partner with Kansas City Capital Partners. "I would expect the same in Indiana."

Braatz said O'Reilly has grown by pulling off a difficult double: appealing to do-it-yourself automobile owners and professional mechanics and shop owners.

"A big part of their success is their distribution network," Braatz said. "If you need a part for an '82 Chevy, they can get it to you tomorrow, if not today."

O'Reilly officials refused to speculate just how many stores might open here, but said at least 20 will be operational in the Indianapolis area and about 50 statewide by year's end.

Braatz, who has closely followed O'Reilly's performance for 15 years, said the company's 565,000-square-foot distribution center in Eaglepoint Business Park is a telltale sign.

"They've followed a strategy of locating a distribution center strategically and growing out from there," Braatz said. "They've rarely, if ever, come up short on their projected growth."

The local distribution facility is O'Reilly's largest, and is designed to serve up to 350 stores. The warehouse employs 140, but O'Reilly spokesman David Turney said there will be 600 or more within the next few years. "We chose Indianapolis due to its central location and transportation infrastructure, but also due to its demographics," Turney said. "The demographics in the Midwest and Indiana in particular are very strong for us."

The local O'Reilly distribution center, Turney said, will likely supply stores in Indiana, Ohio, Illinois, and possibly some points farther south.

O'Reilly's marketing and advertising plans are turning out to be a big boon for the region.

"We don't do a lot of national advertising; we focus our resources locally and regionally," Turney said.

Indianapolis Raceway Park-now called O'Reilly Raceway Park-was attractive, Turney said, because of the number of events-especially National Hot Rod Association and NASCAR-it hosts annually.

Though the deal's financial terms were not disclosed, sports marketers said it was certainly a multiyear, multimillion-dollar deal. In addition to the naming, O'Reilly gets lots of track-side signage.

"The signage is really just the beginning," said Larry DeGaris, associate professor of marketing at the University of Indianapolis.

O'Reilly, which has become known for its grass-roots marketing, will be active at the track, networking with teams and equipment suppliers and getting in front of fans, said DeGaris, who closely follows the business of motorsports and worked with NHRA and NASCAR teams.

"O'Reilly is buying access to an audience, so I expect them to be very active at the track," DeGaris said.

The retailer will drive customers to the track by selling tickets to Raceway Park events at its stores, Turney said.

"This relationship is already benefiting both sides," said ORP General Manager Ron Anderson. "Both sides are heavily cross-promoting the other."

The partnership is allowing the facility to make upgrades, including a new hospitality building and tower that will help draw more fans and corporate sponsors, which in turn allows O'Reilly to further its outreach.

Starting this year, O'Reilly plans to beef up its local marketing, using a combination of television, radio, print, direct mail and event advertising, Turney said. "Their marketing is grass-roots, but it's highly calculated," Braatz said.
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